nep-neu New Economics Papers
on Neuroeconomics
Issue of 2017‒01‒08
four papers chosen by

  1. Prudence, emotional state, personality, and cognitive ability By Breaban, Adriana; Van De Kuilen, Gijs; Noussair, Charles N.
  2. Locus of Control and Investment in Risky Assets By Salamanca, Nicolas; de Grip, Andries; Fouarge, Didier; Montizaan, Raymond
  3. Event-Related Potential Study of P2 and N2 Components on Fast and Slow Responses in the Auditory Condensation Task By Boris V. Chernyshev; Vladimir A. Medvedev
  4. Locus of Control and Investment in Training By Caliendo, Marco; Cobb-Clark, Deborah A.; Seitz, Helke; Uhlendorff, Arne

  1. By: Breaban, Adriana (Tilburg University, School of Economics and Management); Van De Kuilen, Gijs (Tilburg University, School of Economics and Management); Noussair, Charles N. (Tilburg University, School of Economics and Management)
    Abstract: We report an experiment to consider the emotional correlates of prudent decision making. In the experiment, we present subjects with lotteries and measure their emotional response with facial recognition software. They then make binary choices between risky lotteries that distinguish prudent from imprudent individuals. They also perform tasks to measure their cognitive ability and a number of personality characteristics. We find that a more negative emotional state correlates with greater prudence. Higher cognitive ability and less conscientiousness is also associated with greater prudence.
    Date: 2016
  2. By: Salamanca, Nicolas (Melbourne Institute of Applied Economic and Social Research); de Grip, Andries (ROA, Maastricht University); Fouarge, Didier (ROA, Maastricht University); Montizaan, Raymond (ROA, Maastricht University)
    Abstract: We show that household heads with a strong internal economic locus of control are more likely to hold equity and hold a larger share of equity in their investment portfolio. This relation holds when we control for economic preferences and possible confounders such as financial literacy, overconfidence, optimism, trust, and other personality traits. We argue that this relation is driven by a link between internal economic locus of control and a lower perception of the risk of investing inequity. Those with a strong internal economic locus of control perceive less variance in equity, making these investments more attractive.
    Keywords: household portfolios, personality traits, risk and time preferences, risk perception
    JEL: G11 D14 D19
    Date: 2016–12
  3. By: Boris V. Chernyshev (National Research University Higher School of Economics); Vladimir A. Medvedev (National Research University Higher School of Economics)
    Abstract: In tasks involving response choice based on certain stimulus-to-response mappings, at least two stages of information processing may be involved: (1) formation of sensory stimulus object representations leading to stimulus identification, and (2) application of stimulus-to-response mappings (i.e. “task rules”) to these representations leading to response selection. Most of the research done in this area involved simple reflex-like stimulus-to-response mappings, thus addressing mostly the perceptual aspect of decision making. Here we used the condensation task, which involves more complex stimulus-to-response mappings. Within each subject, we divided participants’ responses into four conditions depending upon performance speed and accuracy: fast correct, fast erroneous, slow correct and slow erroneous responses. We compared event-related potentials between these conditions. We found that P2 amplitude was related to performance accuracy, the effect being evident for fast but not for slow responses. N2 amplitude was increased for slow responses – both correct and erroneous. We suggest that fast errors result mostly from erroneous sensory representations that immediately become translated into actions in conditions of low motor threshold. On the contrary, slow responses happen in conditions of low executive attention, through reevaluation of sensory representations and invocation of cognitive control process via the mechanisms of response conflict detection.
    Keywords: auditory perception, cognitive control, attention, response time, event-related potentials, P2, N2.
    JEL: Z
    Date: 2016
  4. By: Caliendo, Marco (University of Potsdam); Cobb-Clark, Deborah A. (University of Sydney); Seitz, Helke (University of Potsdam); Uhlendorff, Arne (CREST)
    Abstract: This paper extends standard models of work-related training by explicitly incorporating workers' locus of control into the investment decision. Our model both differentiates between general and specific training and accounts for the role of workers and firms in training decisions. Workers with an internal locus of control are predicted to engage in more general training than are their external co-workers because their subjective expected investment returns are higher. In contrast, we expect little relationship between specific training and locus of control because training returns largely accrue to firms rather than workers. We then empirically test the predictions of our model using data from the German Socioeconomic Panel (SOEP). We find that, consistent with our model, locus of control is related to participation in general but not specific training. Moreover, we provide evidence that locus of control influences participation in general training through its effect on workers' expectations about future wage increases. Specifically, general training is associated with a much larger increase in the expected likelihood of receiving a future pay raise for those with an internal rather than external locus of control, while we do not find any relationship in the case of specific training. Actual post-training wages for those who receive general or specific training do not depend on locus of control.
    Keywords: human capital investment, on-the-job training, locus of control, wage expectations
    JEL: J24 C23 D84
    Date: 2016–12

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